Virginia’s 2025 Tax Rebate and Legislative Updates

At Meadows Urquhart, we make it a priority to keep our clients informed about the latest updates in Virginia tax law, rebates, and legislative changes that may affect both individuals and businesses. Recently, our team attended the VSCPA Tax Committee meeting, where representatives from Virginia Tax shared updates on key initiatives, technology improvements, and new developments for the 2024 and 2025 tax years. Below is a detailed overview of what’s changing, what to expect, and how taxpayers can prepare.

1. Major IT Modernization Effort Underway

One of the most significant updates is Virginia Tax’s modernization of its Integrated Revenue Management System (IRMS) (its primary IT infrastructure for processing and managing state taxes). The current system, which has been in use for over 25 years, is being replaced with a modern platform designed to:

• Improve the accuracy and speed of tax processing.
• Enhance communication between taxpayers, practitioners, and the Department of Taxation.
• Integrate data across various tax types for a more seamless experience.

Once implemented, taxpayers can expect faster response times, more reliable online services, and greater transparency in how payments, rebates, and credits are processed.

2. Additional 2024 Tax Rebates for Virginia Taxpayers

Virginia will issue additional one-time tax rebates for 2024 tax filings. Eligible taxpayers can expect the following:

• Single filers: up to $200 rebate.
• Joint filers: up to $400 rebate.

These rebates are based on your actual 2024 tax liability, meaning the rebate cannot exceed the amount of tax owed after applying deductions and credits. To qualify, you must file your 2024 Virginia income tax return by November 3, 2025. Early filers could begin receiving their rebates as soon as October 15, 2025.

Rebates will be issued in the order that returns are processed. Direct deposits will go to the same account used for tax refunds, while paper checks will be mailed to those who received refunds by mail.

If you have an outstanding debt with the Commonwealth (such as unpaid taxes, child support, or other state obligations), the rebate may be applied to those balances under the Setoff Debt Collection Act.

For the latest updates or to check your eligibility, visit tax.virginia.gov/rebate.

3. Rolling Conformity Temporarily Paused

In 2023, Virginia adopted rolling conformity, meaning the state would automatically align with most federal tax law changes. However, the 2025 Appropriation Act pauses rolling conformity for any federal tax provisions enacted in 2025 or 2026 that would have a fiscal impact on Virginia over the next five years.

This means:

• Not all new federal tax law changes will automatically apply in Virginia during this period.
• Extenders (provisions that renew existing laws) are not affected by this pause, which is positive news for many taxpayers and businesses.
• The VSCPA intends to work with the state to develop a more sustainable, long-term approach to conformity to prevent confusion and administrative burdens.

For taxpayers, this pause means it’s more important than ever to review both federal and state implications of tax law changes before filing.

What These Updates Mean for Virginia Individuals and Businesses

The 2025 Virginia tax updates have implications for a wide range of taxpayers:

• Individual taxpayers: Review your 2024 tax liability to estimate rebate eligibility. Even if you typically receive a small refund, you may qualify for the one-time $200 or $400 rebate.
• Businesses: Revisit credit utilization, especially if you have historically claimed the R&D credit or PTET benefits. Now is the time to identify replacement incentives or adjust cash flow projections for 2025.
• Tax planning: Because of the temporary pause in rolling conformity, ensure that your Virginia filings correctly account for any differences between federal and state law.

Planning Tips from Our Accounting Team

1. File early – Early filers are first in line for rebates and faster refunds. Filing by summer 2025 can help ensure rebate delivery before the fall.
2. Stay updated on system changes – As Virginia upgrades its IRMS platform, online portals and communication channels may change. We’ll continue to provide updates as new systems are implemented.
3. Reassess business credits – Businesses that relied on the R&D or PTET credits should schedule a tax planning meeting before year-end to minimize potential tax impact.
4. Watch for future conformity adjustments – If federal tax legislation passes in 2025 or 2026, confirm whether Virginia recognizes those provisions.